House Budget Committee’s 2012 Budget Plan

Pulls the Plug on Seniors, Students, People with Disabilities and the Middle Class to Pay for Tax Cuts for Millionaires

The Fiscal Year 2012 budget plan introduced by House Budget Committee Chairman Paul Ryan (R-WI) and approved by the House is a partisan and ideological document completely devoid of fairness and shared sacrifice. It freezes domestic spending at unrealistically low levels but increases military spending, while it provides yet more tax cuts to large, profitable corporations and the wealthiest individuals. It decimates vital public services that working families and seniors rely upon, including Medicare and Medicaid, and lays the groundwork for slashing Social Security benefits. By 2050, it would reduce federal spending as a share of the economy to its lowest level since 1951. (Center on Budget and Policy Priorities, 4/7/11)

While Rep. Ryan touts his plan as deficit reduction, it more accurately redistributes resources from seniors, children and working families to prosperous corporations and individuals. The $4.3 trillion in draconian spending cuts contained in the plan are almost completely offset by $4.2 trillion in tax cuts, mostly benefiting the wealthiest, producing only $155 in deficit reduction over ten years. Moreover, two-thirds of the proposed cuts would be made from programs that serve low-income people. (CBPP, 4/8/11) This budget would produce the largest redistribution of income from bottom to top in modern U.S. history. (CBPP, 4/6/11)

Instead of putting Americans back to work, Rep. Ryan – like his home state governor Scott Walker – is using our real economic problems as an excuse to force more and more sacrifices from those who can least afford them while padding the already-overstuffed pockets of wealthy individuals and corporations. The budget plan would result in significant hardship to states and localities, further exacerbating their fiscal crises and leading to even greater job loss and reductions in vital public services.

The Ryan House budget breaks America’s promise to seniors and relegates their health and retirement security to the whims of insurance companies by cutting $30 billion from Medicare over ten years and repealing key consumer protections in the Affordable Care Act.

Everyone under age 55 would no longer have the guarantee of Medicare benefits and set premiums. Instead, more than 20 million Americans would be given underfunded vouchers to shop for coverage from private insurance companies. The $8,000 voucher in 2022 would not cover today’s cost per Medicare beneficiary seniors. (CBO 4/5/11; Kaiser Family Foundation, 2/11)The Congressional Budget estimates that in the first year, 2022, beneficiaries’ costs would double when compared with traditional Medicare, and triple by 2030.

Seniors will pay a staggering 68% of their medical care costs in 2030, compared to 25% if the law were unchanged. (CBO 4/5/11)An individual turning 65 in 2030 would get a voucher of $9,750 to purchase a Medicare equivalent plan costing $30,460. (Center for Economic and Policy Research, 4/11) For the majority of seniors, the House Budget would mean they would spend more than half of their retirement income on health care. (Center for Economic and Policy Research, 4/11)

Beginning in 2011, the Affordable Care Act (ACA) provides a 50% discount for prescription drugs for Medicare beneficiaries who enter the Medicare Part D “donut hole” and lose coverage for their drug expenses. The law then increases the discount to Medicare beneficiaries each year until 2020, when the donut hole is finally eliminated. The House budget repeal of this provision would increase the average cost of prescription drugs for these Medicare beneficiaries by over $500 in 2011 and by over $3,000 in 2020. (House Committee on Energy and Commerce, 4/11)

The budget would raise the eligibility age for Medicare to 67 by 2033. According to a recent study, this change would shift costs onto employers, states and beneficiaries. It would increase employer retiree health-care costs by at least $4.5 billion and increase the out-of pocket costs for 65- and 66-year-olds by at least $5.6 billion. (Kaiser Family Foundation, 3/11)

The budget does not clearly protect sicker beneficiaries from being slapped with higher premiums from insurance companies because of their health status.

The House budget pulls the plug on Medicare in order to protect billions of dollars in tax subsidies for the oil industry and to give additional tax breaks for the wealthiest Americans.

Converting Medicaid into a block grant will threaten health coverage for 14 million seniors and people with disabilities, 30 million children, and cause the loss of 3 million jobs.

The House budget plan would result in $1.4 trillion in cuts to Medicaid, which includes repeal of funding for the ACA’s Medicaid expansion, but does nothing to reduce health care costs. (Families USA, Special Report, April 2011) The nonpartisan Congressional Budget Office (CBO) estimates that under the Ryan plan, federal spending for Medicaid would be 35% lower in 2022 and 49% lower in 2030 than current projected federal spending.

Medicaid provided health care to 60 million Americans last year, half of them children. Seniors and people with disabilities, while representing 25% of Medicaid recipients, account for two-thirds of all Medicaid expenditures, mainly because Medicaid is the primary funder of nursing home and other long-term care (CBPP; Families USA)

Medicaid block grants would shift costs and responsibility to states, beneficiaries, and health care providers. The CBO projects that if states want to maintain current Medicaid service levels, they would likely need to reduce spending on other public services or increase taxes. The alternative is to cut payment rates to health care providers, reduce covered benefits, or limit eligibility.

If Rep. Ryan’s Medicaid block grant had taken effect in 2000, by 2009, federal Medicaid funds would have fallen over 25% in most states, and over 40% in some states. (CBPP, 4/12/11)

Without Medicaid coverage, middle class families would face enormous financial strain caring for parents and other relatives who could not afford to pay for long-term care. At least 70% of persons over age 65 will likely need long-term care services at some point. (House Budget Committee Democratic Staff Analysis of Republican Budget Resolution, 4/11/11)

A Medicaid block grant would significantly deepen state budget gaps during recessions, forcing budget cuts or tax increases that would further slow state economies and result in more job losses. It was estimated that a similar Ryan proposal to cut and block grant Medicaid would cost 3 million jobs from 2013 to 2020. (Center for American Progress, 2/28/11)

Block grants are not necessary for states to have flexibility in designing Medicaid benefits, health care delivery, or provider and plan payment procedures. Considerable flexibility already is available to states under the current program.

A strong Medicaid program is necessary to build a long-term care workforce that we will need for the future.

House’s budget avoids a direct assault on Social Security, but it establishes a new fast track procedure designed to force benefit cuts.

The proposed budget assumes that Congress will establish a trigger and a process to consider Social Security changes. If the 75 year actuarial balance in the Trust Fund is in deficit, and the annual balance is in deficit, the Social Security Board of Trustees must recommend and the President must submit implementing legislation to Congress to achieve balance. Within 60 days of the President’s submission, the congressional committees of jurisdiction must report legislation that would be considered by the full House and Senate under expedited procedures.

There is a clear implication that balance should be achieved through benefits cuts, which is reinforced in the background material released along with the legislation itself.

House budget repeals and defunds the Affordable Care Act.

34 million people will likely lose their health insurance coverage under the House budget proposal due to repeal of the ACA’s Medicaid expansion and other provisions. (CBO)

Consumer protections will be lost, returning to a system that allows health insurance companies to unfairly deny coverage and raise rates.

The ACA is providing states with new tools to reduce the growth in health care costs, including demonstration projects testing new ways to deliver care, coordinating care for those eligible for both Medicaid and Medicare, and reducing Medicaid prescription drug costs. These new, innovative approaches would be lost.

Food Stamps (now called SNAP) is converted into a block grant.

The Ryan budget would cut SNAP funding by $127 billion, almost 20 percent, over 10 years. SNAP plays a vital role in feeding millions of hungry Americans, especially during times of economic stress. During our most recent recession, the SNAP rolls increased by 45 percent from 2007-2009 as the number of unemployed increased. The very purpose of a safety net program such as SNAP is to provide additional assistance in economic hard times. This ability would be lost under a block grant funding structure. The overwhelming majority of SNAP households are families with children, seniors, or people with disabilities. (CBPP, 4/5/11, 4/11/11)

House budget cuts all categories of non-security discretionary spending by a total of $1.6 trillion. (CBPP, 4/6/11)

Education: The budget would cut funding for education programs in FY12 by $16.7 billion, or 18% percent. The Ryan budget would cut K-12 education funding every subsequent year, quickly reaching annual cuts of more than 25 percent below current levels. (House Budget Committee Democratic Staff Analysis ofRepublican Budget Resolution, 4/11/11) The value of Pell grant awards for low-income college students would be cut by approximately 60% in 2012. (Senate Budget Committee Analysis of House Budget Resolution Proposal, 4/6/11) This unprecedented cut would drastically reduce the maximum award for over nine million low and middle-income students, likely denying college access to many of them.

Transportation: The Ryan budget cuts transportation funding by $318 billion over ten years, a 33% reduction compared to the 2011 March baseline. (Senate Budget Committee Analysis of House Budget Resolution Proposal, 4/6/11) Ryan’s plan would delay modernization of our crumbling infrastructure, reduce jobs and negatively impact our quality of life.

Public Safety: The budget proposes to slash $9.6 billion, or 18%, from current funding levels to local law enforcement, including the Community Oriented Policing Services (COPS) program. (House Budget Committee Democratic Staff Analysis of Republican Budget Resolution, 4/11/11)

Dramatic Reductions in Vital Public Services and Programs: This budget targets cuts to countless other vital services and investments including Head Start, child care, health care, Community Development Block Grants, housing, jobs programs and more. By 2021, total spending for non-security discretionary programs would be cut one-third compared to the 2010 level adjusted for inflation. (CBPP, 4/6/11)

The Ryan budget increases “security” spending.

As it obliterates spending to protect the health and welfare of seniors, children and working families, the House budget exempts security spending, including military spending, from the cap on discretionary spending. Instead, it provides funding growth each year for the next decade, adding a total of $214 billion in additional military funding. (National Priorities Project, 4/6/11)

House Budget Reduces Taxes on the Wealthy and Raises Taxes on Working Families.

In contrast to President Obama and most Congressional Democrats who support the scheduled December 31, 2012 expiration of Bush-era tax cuts for joint filers earning more than $250,000 and single filers earning more than $200,000, the House budget permanently reduces tax rates for these top 2% of earners, including millionaires and billionaires.

Worse, this budget would reduce the top individual income tax rate from the current 35% to 25%. This regressive proposal benefits only the wealthy and establishes the lowest top federal individual income tax rate since 1931 (Citizens for Tax Justice undated: http://www.ctj.org/pdf/regcg.pdf) In contrast, President Obama proposes to let the top rate increase, as scheduled, from 35% to 39.6%.

The House budget would permanently maintain the estate tax’s reduced rate of 35% and increased exemption of $5 million per person, which Republicans insisted on including in the compromise tax package enacted in December, 2010. This reduces federal revenue by tens of billions of dollars, while benefiting estates of only the wealthiest .025%.

The Ryan budget’s tax giveaways to top earners would reduce federal revenue by $700 billion over the next 10 years. Those earning more than $1 million would each receive average annual tax cuts of $125,000, which excludes additional tax cuts from reducing the top tax rate from 35% to 25% and maintaining the current weak estate tax (Tax Policy Center)

The Republican House budget reduces the top corporate tax rate from 35% to 25%, which benefits large profitable corporations and wealthy shareholders who are already paying well below their fair share. In the mid-1950s, corporate taxes made up 30% of all federal revenue; in 2009 it made up 6.6% (New York Times: http://www.nytimes.com/2011/03/25/business/economy/25tax.html?_r=1)

The House budget does not identify a single corporate tax break it would eliminate, including preferences for oil and gas companies or hedge fund managers’ carried interest loophole.

Setting the maximum individual and corporate income tax rates at only 25% likely necessitates paying for the resulting extraordinary drop in tax revenues by eliminating or significantly reducing key tax benefits for middle class working families, such as the tax exclusion for employer-provided health care and vital safety net provisions including the Earned Income Tax Credit (EITC) and child credit. The House budget fails to list the tax expenditures it would reduce or eliminate.

Although it claims to broaden the tax base and close tax loopholes, the House budget uses almost all this revenue to cut tax rates rather than reduce the federal deficit or invest in vital public services and infrastructure.

AFSCME is the American Federation of State, County and Municipal Employees, AFL-CIO. Our 1.6 million members provide the vital services that make America happen. AFSCME advocates for fairness in the workplace, excellence in public services and prosperity and opportunity for all working families.